College is expensive! Having just enrolled my daughter as a freshman, I am well aware of how much college is costing me. Fortunately, I started saving when she was 2 and now have the cost of her undergraduate degree banked. But, if I had not been saving all these years, I do not know how I would pay the $25,000 a year in tuition, room and board out of my current income. Some facts to consider:
Timeline Public In-State Public Out-of-state Private
Today $85,323 $146,996 $189,657
In 5 Yrs $107,718 $185,879 $239,436
In 10 Yrs $144,151 $248,347 $320,422
In 18 Yrs $229,754 $395,827 $510,708
Source: College Board’s “2013 Trends in College Pricing”
83% of Colorado parents are planning on paying for college with scholarships. The reality is that less than 11% of students receive merit scholarships and the average award was $2,815.
Is it time to consider setting up a 529 plan for your children? The 529 plans allow you to save for college in a tax deferred account. If the funds are subsequently used for qualified education expenses, the distributions are tax free. In my particular case, about 2/3rd of my daughter’s account was contributed by me and 1/3 of the account was earned through the investments used. Obviously, the sooner you start the better. There are several investment options available that will fit to your particular risk adversity, number of years you have to save, etc.
You can save for your own children, but other people can also fund for your children. So it is a great way for grandparents to gift money to their grandchildren. Others can fund for your children as well, so you can increase your funding with well-meaning family members and friends.
If you plan on sending your kids to college, now is the time to figure out how you are going to pay for it.